Self-Control In Day Trading: The Biological Factors

Day trading takes self-control. Whether we trade the stocks, forex or futures, we need to possess self-control…which can be elusive at times. Why it is elusive is partially due to biology. Read why and how our biology affects our self-control and discipline, and what to do about it.

This article was sent to me by a friend many years ago, and it has some great points. We not sure of the source of the article, but it takes a look at why new day traders often find it hard to stick to their trading plan.

Self-Control: Biological Factors

By Michael Shopshire, PHD

Do you have trouble sticking with your trading plan? There are many psychological reasons for abandoning a trading plan. Some traders fail to specify a plan that is realistic and easy to follow. When things don’t go their way, they abandon the plan. Other traders merely don’t have enough experience trading the markets, are caught off guard, and lose control under the strain. Psychological factors are not the only possible explanations for a lack of self-control, however. Biological factors may also play a role.

For some traders, a lack of self-control may reflect their personality. Some traders may have the tendency to show the trait of sensation seeking, a term coined by psychologist Dr. Marvin Zuckerman. According to Dr. Zuckerman, sensation seeking is a powerful need for varied, novel, and complex sensations and experiences. These needs are so strong that the sensation seeker is willing to take physical and social risks for the sake of such experiences. The ability to inhibit this response, according to Dr. Zuckerman, has significant genetic components. Dr. Zuckerman claims that specific areas in the brain are responsible for the inhibition of the sensation seeking response, with some individuals able to inhibit this response more easily than others. Sensation seekers get bored easily and seek out new and exciting experiences to combat boredom. This can lead to impulsive trading.

Even if you don’t have the personality to act impulsively, you still may act impulsively at times. Dr. Roy Baumeister and colleagues have argued that self-control relies on a limited energy source that becomes depleted with use. After exerting self-control, people are prone to fail at later attempts at self control. It is possible that an initial act of self-control consumes some energy source that is needed for later. For example, when you spend your limited psychological energy controlling stress, you will later have trouble paying attention to the market action. Self-control works like a muscle. You may have little difficulty controlling your impulses at first, but as you expend energy, you will wear out and have difficulty maintaining self control.

Viewing self-control as a muscle that wears out may be just an analogy. Self-control is like a muscle, but it is not a muscle. That said, Gaillot and Baumeister (2007) have recently argued that there may be a biological basis for the idea that self-control works like a muscle. Research studies suggest that acts of self-control deplete relatively large amounts of glucose. Glucose is fuel for the brain. When you eat, food turns into glucose that your body needs for energy. Your brain needs glucose to function. Without glucose, your brain cannot function properly. You will have trouble paying attention and concentrating. And you will have trouble sticking with your trading plan.

Research studies suggest that after you engage in tasks requiring self-control, your glucose is depleted and must be replenished. Gaillot and Baumeister (2007) do not suggest, however, that increasing blood glucose levels will improve self-control. In other words, eating a bag of candy may increase glucose levels but not help you stick with your trading plan. Rather, after you engage in self-control tasks long enough, glucose is depleted and you must take a break until your glucose levels return to an optimal level.

Scientific studies suggest that self-control works like a muscle. When you tax a muscle, it wears out and you need to rest. It’s the same with self-control. Acts of self-control use up your limited amount of psychological energy. It is vital to rest, and restore your energy levels before trying to engage in additional acts of self control. You are not a machine. It is essential to admit your human limitations and work around them.

3 thoughts on “Self-Control In Day Trading: The Biological Factors”

Sorry Cory, I realize this may not be the best forum to address this but simply wanted to right this as urgently as possible as I try to read every article and email I get from you. I tried to follow the link to read your articles on the “5 forex strategies to help you improve” and the screen gave me a message that I have been “banned from this site”!? please advise soonest as I am sure this is an admin error of sorts as I cannot for the life of me imagine any reason why this should be the case? Thanks Mark

Thanks for the insights. As a newbie trader, I’ve struggled to stay on my plan and as a result have made questionable trades, moved stop losses to avoid losing ( resulting usually in bigger losses), stayed up all night pip watching etc etc. when I started I read that you need to demo trade for a year. I started after six months as I thought I was ready. I may be good at technicals but I am learning I need to control the very aspect you warn about … Thrill seeking and lack of self control.